Kochi: Textile exporters in Tirupur face a bleak Christmas as the global economic downturn slows demand ahead of a peak sales season.
Exports from this northern Tamil Nadu town, considered India’s textile hub, are expected to drop 20-30% in 2008-09 because of slowing demand from the US and Europe, adding to a shortage of power for the firms, estimates A. Sakthivel, president of the Tirupur Exporters Association, or TEA, a industry lobby, who adds layoffs of textile workers is imminent.
Troubled times: Textile factories in the town are considering laying off at least 20,000 workers initially.
Overseas orders in October, and so far in November, when Tirupur’s textile houses typically get most of their bookings for the festive season and the first few months of the next year, have dropped by up to 50%, said R. Gopalakrishnan, chairman of textile company Royal Classic Pvt. Ltd.
“Even for orders placed earlier, the buyers are seeking lower rates...both prices and orders are low,” he said. “This time there were very few orders for spring deliveries across the US and Europe, prior to Christmas and New Year.”
Already, exports have dropped to Rs5,050 crore between April and September, from Rs5,350 crore in the same period last year, he said. Most of these exports were on orders placed at the end of 2007.
Tirupur’s poor run started with the rapid appreciation of the rupee through 2007 to early 2008, when the currency stayed at Rs39-40 levels against the dollar. The woes extended with the power shortage in the state that saw electricity supply disrupted regularly during peak production hours.
Tirupur has about 350,000 workers in some 6,000 units engaged in knitting, dyeing, garment making, printing, embroidery and other related work. But, after years of growth, its knitwear exports fell to Rs9,950 crore in 2007-08 from Rs11,000 crore in the previous year, mainly because of the strengthening rupee.
The industry is already facing production and job cuts because of the power shortage in the state.
Textile factories in the town have reduced working hours and are considering laying off at least 20,000 workers initially. This could also result in job cuts for workers in related sectors such as ginning, spinning and weaving.
Government intervention is imperative, claims TEA’s Sakthivel. The duty drawback rate of 8.8% should be restored to the earlier 11%, and the government should consider an interest moratorium for two years on repayment of term loans.